More Sustainable Dairy Farms Also Performed Better Economically

Can Dutch dairy farms that work more sustainably also perform well or even better economically than less sustainable dairy farms? Yes, that is possible, according to a study by Wageningen Economic Research, commissioned by the Sustainable Dairy Chain, a theme group of ZuivelNL.

The researchers conclude that Dutch dairy farms that scored best on sustainability goals of the Sustainable Dairy Chain also performed better economically. They chose the dairy farms that performed best on the sustainability themes of biodiversity, climate and land-use and compared them with the rest of the dairy farms. They looked at company characteristics, technical results and economics. However, the fact that the more sustainable farms also performed better economically does not mean that there is economic perspective for other dairy farms to develop their business in that direction in the future.

Lower costs and higher yields per kg of milk
The costs directly related to milk and crop production are 2.56 euros per 100 kg of milk lower at more sustainable dairy farms than at the rest. This is mainly due to the lower costs for animal feed (-2.13 euros) and lower manure disposal costs (-0.25 euros). Both are related to lower milk production per hectare. The more sustainable dairy farms are on average more extensive and produce 150,000 kg less milk at farm level than the rest group. Milk production per hectare at the more sustainable dairy farms averages almost 14,400 kg, while the remainder group is more than 3,000 kg above this. The costs for animal health are also lower (-0.14 euros). The total costs per 100 kg of milk are 1.68 euros lower at the more sustainable dairy farms, but that difference is not significant.

In addition to lower costs, the more sustainable dairy farms also have 3.30 euros higher yields per 100 kg of milk. About half of this difference is the result of higher milk yields (+ 1.67 euros). This can be explained, among other things, by the financial valuation of environmental and/or other sustainability performance at the best companies. The share of organic companies and companies with the On the way to PlanetProof quality mark appears to be higher in the group of best-performing companies than in the rest of the companies. It is important to realize that other dairy farmers who would like to do so cannot always simply supply milk for such milk flows. Matters such as market demand and the location of the company in the Netherlands can be decisive.

The lower costs and higher yields per 100 kg of milk lead to an income at the more sustainable dairy farms, despite the smaller farm size, that is more than 28,500 euros higher at farm level than the rest group.

Experience counts
The more sustainable dairy farms are more often run by farmers between the ages of 45 and 55 and less by entrepreneurs under the age of 45. A possible explanation for this is that younger livestock farmers have relatively less experience. Middle-aged dairy farmers have already paid an apprenticeship fee and thus further developed their craftsmanship. Another explanation may be that young entrepreneurs are more concerned with growth or business development and less with optimization.

Less peat soil
The more sustainable dairy farms have 12% less peat soil than the rest of the farms and the most common soil type on the farm is often sand. In terms of provincial distribution, the more sustainable companies are mainly located in Overijssel, Friesland and Groningen, and are less represented than the rest of the companies in Gelderland, North Holland and Drenthe. This spread could partly be related to the drought in 2020. Drought may have had a negative impact on sustainability performance. The drought was more extreme in Gelderland and hardly played a role in the north of the country.

Craftsmanship and entrepreneurship are important
Craftsmanship appears to help determine performance in the field of sustainability. This expertise can be increased through knowledge processes and/or the use of independent advisors or coaches.

Entrepreneurship is also important, and it is characteristic of more sustainable livestock farmers that they stick to their own course that suits them and that they consistently maintain that line. Livestock farmers can be facilitated in determining the right course and making strategic choices.

Dairy processors' long-term goals can also help dairy farmers chart a course. These goals provide clarity about what is expected of a dairy farmer as a member or supplier of a dairy processor in the future.

Being extensive is not the same as becoming extensive
The research has been retrospective and the research therefore does not answer the question of how to achieve a different business operation. The more sustainable companies are more extensive and have a higher income in this study. This does not mean that extensification is economically feasible. Being extensive is not the same as becoming extensive. For example, companies with more extensive business operations may have been following a strategy for decades to maintain a certain balance in the ratio of land and animals as the company grows. Given the current social context, these companies now have a better starting position.

Other companies may have consciously opted for more intensive business operations within the legislation that applied in the past, with relatively more investment in, for example, production rights (milk quota and later phosphate rights), functional stables and manure processing. It may be economically difficult or impossible for those companies to extensify now, for example because of the investments already made in the past. After all, expansion means more land and land is expensive and not always available. Or extensification means keeping fewer animals, so that not all stable capacity is used and the fixed costs per kg of milk increase.